District Heating as a Source of Flexibility in the Nordic Electricity Market

Transcription

1 District Heating as a Source of Flexibility in the Nordic Electricity Market SAEE-Conference, Luleå August 2016 Ole Jess Olsen, Energy Economics and Regulation, DTU Management Engineering, DK Klaus Skytte, EER, DTU Management Engineering, DK Daniel Møller Sneum, EER, DTU Management Engineering, DK Emilie Rosenlund Soysal, EER, DTU Management Engineering, DK Eli Sandberg, NMBU Ecology and Natural Resource Management, NO

2 The challenges Large amounts of variable renewable energy sources (VRE) are being deployed in the Nordic countries, especially wind power In Denmark the share of wind power is close to 50% of electricity production, in Sweden to 10% Also PV and small hydropower are increasing their share This calls for additional flexibility of the power market This presentation is part of a Nordic project, Flex4RES

3 Flex4RES has the objective to investigate the future options to increase flexibility on the Nordic/Baltic power market: Through a holistic system approach based on coupled energy markets, we identify potentials, costs and benefits of achieving flexibility in the Nordic electricity market created by the heat, gas and transport sectors as well as by electricity transmission and generation. Our part of the project is to look at the framework conditions for flexibility by identifying regulatory barriers and drivers

4 What is flexibility? In this study, production or demand is considered flexible when it is possible to vary it within a short time period The following equation has to be fulfilled: Fixed production + variable production - variable demand = flexible demand - flexible production i.e. the variability in production from wind power, solar power, outages etc. and in demand (i.e. the residual load ) is to be balanced by flexible demand and flexible production *fixed production is generation, which is not dispatched - like nuclear power

5 Is this something new? The balancing of generation with consumption in real time has always been a problem for the system operator However, the magnitude of the problem increases with larger shares of intermittent power generation Data from wind countries like Denmark, Germany and Sweden demonstrate that the intra hour variability is relatively small, whereas inter hour variability can be large Therefore, we focus on the large scale changes from hour to hour

6 Framework conditions Three levels are considered, when evaluating the ability of measures to provide flexibility 1. Technical: Does the measure have a potential for contributing to or prevent flexibility? 2. Investment: Are there incentives to invest in the measure? 3. Operation: Are there incentives for the measure to operate flexibly?

7 District Heating as a flexibility source Today hydro power is the main production source of flexibility in the Nordic power market but the potential for expansion is limited District heating (DH) is already an additional source of flexibility of some magnitude in several countries particularly in Denmark As DH provides a large share of heat supply in all countries except Norway it has a large potential for providing flexibility that is far from being exploited today

8 A survey of DH We have conducted national surveys of the regulation framework for DH through review and consultation with key stakeholders in seven Nordic and Baltic countries (Iceland is not included) The objective is to identify drivers and barriers for utilizing DH as a source of flexibility for the power market These surveys are compared to identify differences among the countries

9 TWh DH in the Nordic/Baltic countries supplies 135 TWh (electricity supply is 370 TWh) Denmark Estonia Finland Latvia Lithuania Norway Sweden Total district heating sales (TWh) in 2013

10 Technologies covered in the survey Heat storage Combined Heat and Power plants (CHP) Electric boilers Large heat pumps Heat-only boilers in DH (as a substitute to CHP) Large solar heat panels Flexible DH network operation Consumers of DH as flexibility providers Feed-in to the DH grid from industry

11 Technologies with a large (exploited og unexploited) flexibility potential Several of the investigated DH-technologies can beneficially integrate with the power market and thus provide important options for flexibility, both production and consumption flexibility Today CHP is far the most important source of flexibility Power-to-heat technologies such as electric boilers and heat pumps possess a large potential for supplying flexibility that is largely unexploited

12 CHP supplies a large share of DH in most countries and very large shares of power generation in some countries 80% 70% 60% 50% 40% 30% 20% 10% 0% Denmark Estonia Finland Latvia Lithuania Norway Sweden in electricity production in district heating

13 Is CHP providing flexibility? In the three Nordic countries, Denmark, Finland and Sweden, CHP-plants are responding to spot market price signals and thus are helping to balance the power market In the three countries most CHP-plants have invested in water tanks making it possible to store hot water and produce when power prices are high Smaller, gas-fired units can adapt very fast, but also some of the larger coal-fired units have developed very good ramping rates (in DK, not Finland)

14 Why not in the Baltic countries? Flexible integration with the power market is only marginal in the three Baltic countries The main objective has been to substitute existing power production such as shale oil in Estonia and nuclear power in Lithuania and Latvia that are considered polluting or risky The present regulated ( feed in tariffs ) power prices don t provide economic incentives for investing in water tanks and thus become a source of flexibility for the power market

15 The future for flexible CHP is threatened In some countries by tax incentives making it more economic to invest in biomass-fired heatonly boilers when substituting existing plant Large CHP-units are threatened by market development, not only in the Nordic area (Denmark) but elsewhere in Europe (Germany) The increasing amount of wind and solar power makes it uneconomic to continue production not to speak of investing in new plant

16 Power-to-heat technologies are important in Norway - but here DH is marginal and in Sweden but only very little capacity has been added for a long time In the other Nordic/Baltic countries these technologies are either marginal or nonexisting Electricity prices including taxes is the main barrier For instance Denmark is talking much about the potential of these technologies but is doing very little

17 Choice of Heat supply - different el prices Heat price Electric boilers Heat pumps Heat only boilers Optimal technology choice CHP Electricity price

18 Results There are no direct policies for flexibility in the Nordic and Baltic countries, which means that flexibility is mainly provided by market incentives and very little by energy policy A good case is a CHP-plant investing in a water tank The need for flexibility varies It might become most pronounced in the short term in the Nordic countries (Denmark) which have larger amounts of variable renewable electricity Sufficient capacity and self-supply is of higher priority in the Baltic countries Combined heat and power (CHP) and power-to-heat technologies are identified as the technologies in the heat-electricity interface providing the largest potential for supplying flexibility CHP is an important technology for DH but its future is threatened Power-to-heat is up against a tax structure that makes it uneconomic to invest in these technologies

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